Largely known for oil until now, private consumption is going to become a lot more important to the Nigerian economy over the next few years. Although Nigeria is still very poor on a per capita basis and divided very unequally by income, there are reasons to be more optimistic now about its domestic demand potential than before. Fundamentally, the economy looks like it is going to grow pretty strongly over the next few years as investment into the non-oil economy picks up.

A huge population nearing 160mn, a youthful demographic profile and an emerging middle class will provide plenty of momentum to the private consumption growth story, as middle-class Nigerians in particular start spending a lot more. As incomes grow, tastes and preferences will obviously evolve as greater investment into consumer-facing industries takes place. In theory, this should allow Nigerians to fill up their shopping baskets with more expensive goods, consume higher-value foods (more meat) and engage in greater discretionary spending. With time this will knock on to a lot of other sectors including air travel.

Unilever Upping Its Direct-To-Consumer Distribution Game – How well companies distribute products is hugely important across Sub-Saharan Africa. Organised retail is spread so thinly and most people do their shopping at kiosks, so the dynamics of getting products to the market are completely different than in other regions, especially outside the big cities. Coca-Cola has arguably mastered this, while others are doing very well too. Unilever is piloting its direct-to-consumer distribution scheme, with which it has had much success in India, Nigeria and Kenya. Mainly used rurally, the scheme is employing people to take goods directly to consumers.

Getting products directly to the market is the name of the game, which has provided a lot of scope for innovation. Coca-Cola provides kiosks with fridges and individual vendors with coolers and bicycles, which is hugely relevant to its success.

Unilever's African business has grown strongly over the past few years and is believed to be worth more than US$7bn in sales per annum. It seems to be doing particularly well in Nigeria, which is probably its most important market in West Africa given its size. Nigerians are getting richer, which has been clear to see across beer, food and basic industries. With income rising and more Nigerians increasingly able to afford Unilever's brands, there should be a lot of room for growth.

Diageo's Stout Investment to Boost Exciting Beer Sector – There is a big contrast between how Guinness has been selling in the UK and Ireland and in Nigeria over the past few years. In Nigeria, where the recipe for Guinness is traditionally much stronger, more Guinness is now sold than in Ireland. Guinness is of course owned by Diageo, which has been growing in Africa quite quickly. The continent now accounts for about 12% of Diageo's global business. Guinness Nigeria is the second biggest beer company in Nigeria by market share behind Heineken's Nigerian Breweries and is set for a big capital investment, with Diageo announcing plans to invest GBP225mn to grow its business in Nigeria over the next few years.

Key Risks to Outlook

Disposable Income Divide – Compounding the disposable income divide that continues to hold down the consumer sector in Nigeria is a sharp north/south divide, with most of the income growth accruing to the south.

Dismal Business Environment – Nigeria's business environment is at best unforthcoming to enterprise. Bureaucracy and corruption are rife, while infrastructure is highly underdeveloped and unreliable, which inflates operating costs.